A New Social Engineering Mission Won’t Save Postal Service

The U.S. Postal Service has lost money every year since 2007, and its financial finances aren’t likely to improve any time soon. Thanks to declining mail volume due to greater reliance on email and exorbitant labor costs, the postal service loses billions per year despite a range of benefits that include taxpayer subsidies, a government-enforced monopoly on certain types of mail, and exemptions from state and local taxes.

Yet rather than contract or privatize the agency, some are proposing the terrible idea of expanding it into new sectors of the economy in order to service a social agenda.

Democratic presidential candidate Bernie Sanders suggested in a recent interview that the postal service should get into the businesses of providing loans, particularly to the poor. Existing institutions that provide credit options for the under-banked, such as so-called payday lenders, are facing a regulatory jihad from the Obama administration and provide easy fodder for politicians looking to wage class warfare.

Due to the inherent risks in lending to the poor and others with weak or no credit history, payday lenders have to charge higher interest rates than traditional loans in order to operate. And because their loans are much shorter, those rates when expressed in annual percentage rates like traditional loans appear exorbitant. That’s why Bernie Sanders claims they “rip you off.”

Without those rates, however, the loans themselves wouldn’t be offered. According to an FDIC study, payday lenders earn on average about just nine cents for every dollar lent. Many lenders offering other, less disparaged forms of credit achieve higher returns.

The idea to offer loans through the postal service isn’t new. Sanders’ fellow populist, Sen. Elizabeth Warren, suggested in 2014 that the service could both “provide affordable financial services for underserved families” as well as “shore up its own financial footing.”

This promise of crafting a government agency to achieve both social engineering and financial success is tantalizing, but elusive.

The record shows that such dual mandates are a recipe for disaster. Politicians couldn’t decide whether Fannie Mae and Freddie Mac should be profitable enterprises or serve political goals to increase home ownership among the poor. The agencies tried to do both and succeeded at neither, leading to a housing bubble and expensive taxpayer bailouts.

There’s little reason to believe an already ailing and inefficient postal service will now succeed in the small-dollar loan market while also serving the political agenda of politicians like Sanders and Warren. Expanding the service into new sectors of the economy will do nothing to rectify the problems caused by its status as a government agency. And in the case of banking, it would expose taxpayers to tremendous financial risk.

Congress routinely meddles with the operation of the postal service by preventing closure of little used locations, price varying based on geographical location, or reductions in its costly workforce.

Rather than putting a government-operated postal service into competition with private lenders, lawmakers should finally free it from the government shackles that prevent the innovation and adaptation needed for it to succeed in the 21st century. Numerous nations — including Germany, the Netherlands, Great Britain, and soon Italy — have successfully privatized their postal service systems. American politicians should follow their lead and focus on governing, and leave business to business.

6 responses to A New Social Engineering Mission Won’t Save Postal Service

There is only one way to save the US Postal service. Take advantage of the wasted space in every postal facility to sell sundries related to mailing, packaging and writing. Pens, pencils, boxes, packing tape, wrapping paper, tape, gift wrap, greeting cards etc. Maybe even canned drinks hot and cold and light snacks. The issue is there is not enough revenue generated to support the facilities and labor costs. with their working arrangements with FEDEX and UPS they should also accept packages for shipping. The most important issue though is to take it out of the hands of congress and make it into a Federal not for profit corporation. If the unions think that their wage and benefit demands would make it profitable, let them cough up the necessary capital to keep it running.

You realize this is how it used to work, though they weren’t government buildings and employees. In my home town the old general store still had its old postal cage until it finally went out of business, though it was no longer used since the post office had purchased land and built its own post office with dedicated employees. Until then the general store owner handled postal service but his main business was selling sundries. Essentially you’re calling for a government owned general store with a postal cage, but government employees reaping huge benefits packages. If the government ran all the grocery stores you couldn’t afford groceries.

Many post offices already sell packaging materials and greeting cards. Operationally, USPS is profitable, and has been for the past 2 years. 100% of its debt and 80+ % of its losses are directly attributable to a mandate from the 2006 lame-duck Congress requiring USPS to prefund 75 years’ of future retiree health benefits within 10 years, a draconian requirement to which no other entity — public or private — has ever been subject. This prefunding mandate has brought USPS from being debt-free and profitable, in 2006, to the very brink of insolvency. Postal banking is wonderful. I had a Post Office savings account as a child in Michigan, and it started me on a life-long habit of saving. It should be reinstituted and would benefit the millions of unbanked and under-banked Americans. The biggest bank in Japan is its postal one, and — business-wise — we are just as capable as the Japanese.

Postal Banking is used in both Japan and France. It works quite well and increases savings rates and

is the preferred method of banking by the elderly. Having worked in a bank, I realize the banks are just cheating their poorest customers for basic banking services. I am more worried about Post Offices becoming true lending institutions. That could become way too big to fail.